More than $1 billion has been wiped off the market value of Sirtex Medical after the company said its much anticipated clinical trial of its novel liver cancer therapy failed to show a significant improvement over standard chemotherapy.

Shares in the medical device company lost 55 per cent to close at $17.53, $21.47 lower than their last close of $39.00.

Departed Sirtex Medical chief executive Gilman Wong sold more than a quarter of his holding in October 2016. Photo: Getty Images

Australian Ethical Investments portfolio manager Andy Gracey tried to maintain an optimistic outlook. Although the result was "disappointing" Mr Gracey said Sirtex's announcement, which was light on detail, offered a glimmer of hope.

"Not all is lost," he said.

'Salvage' therapy

Sirtex already earns about $130 million in annual revenue from the sale of its SIR-Spheres product, which are radioactive beads that are inserted into the blood supply to fight liver cancer from the inside. Oncologists have seen the product as a "salvage" therapy, meaning they turn to it when standard care like chemotherapy has failed.

Sirtex had hoped that its seven-year SIRFLOX study would make a big enough improvement on progression free survival to change the thinking of oncologists to consider SIR-Spheres as a first line of defence. Progression free survival measures the time after treatment until existing tumours progress or new tumours develop either in the liver or elsewhere in the body.

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Although the trial showed Sirtex did not meet its primary endpoint of a significant improvement in overall progression free survival, it did show a significant improvement when the measure was restricted to just looking at tumours in the liver.

Sirtex did not make further comment on Tuesday. It will release more comprehensive data in May at the American Society of Clinical Oncology. The conference places strict rules on what information can be released before the event.

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"We really need stronger data around the recruitment in terms of how many patients were recruited that had cancers outside the liver," Mr Gracey said. "It's definitely working in the liver which is exactly what it has been designed for."

SIRFLOX looked at metastatic colorectal cancer, which is when cancer starts in the bowel and moves to the liver. Sirtex has three other clinical trials running at the moment that focus on cases where the primary cancer starts in the liver.

"I wouldn't, at the moment, be assigning Sirtex to just salvage therapy," Mr Gracey said.

Blow to biotechnology industry

But many investors lost faith in the stock on Tuesday, which had soared 150 per cent in the past year in anticipation of the clinical trial result, and the result will come as a blow to the local biotechnology industry.

Not all is lost.

Andy Gracey, Australian Ethical Investments

A number of analysts had stoked the market's excitement with bold upgrades to their recommendations in recent weeks.

Last month, both UBS analyst Andrew Goodsall and Wilson HTM analyst Shane Storey upgraded their investment recommendations to "buy" and slapped 12-month price targets of about $50 on the stock.

On a measure of market capitalisation, which is a sum of the value of shares on offer, Sirtex slipped to about $900 million on Tuesday. It is now the second-largest of the market's early-stage biotechnology companies behind Mesoblast, which has a market capitalisation of $1.3 billion. The established biotechnology giant CSL, which manufactures blood products and vaccines, is the sector's largest with a market capitalisation of $43 billion.

The trial result also hurt Oncosil, which is a $30 million company developing similar radiotherapy technology. Oncosil shares slumped 27.5 per cent to 8.7¢.

Morgans analyst Derek Jellinek, the only analyst surveyed by Bloomberg who has a negative recommendation on the stock, said he believed fair value was in the range of $15 to $20 a share.

"While we do not expect unfavourable results to negatively impact uptake of the device in its current 'salvage setting', trading levels have optimistically baked-in favourable trial results," he wrote to clients.

Listed investment company Hunter Hall Global Value is Sirtex's largest shareholder with a stake of just over 7 per cent, despite some recent profit taking in early March. According to the manager's website, 18.3 per cent of its fund was allocated to Sirtex on February 28 this year.